The Marriott Acquisition of Starwood Hotels

It was not fun writing with the gloves of an autopsist when giving my opinion that shareholders of Plum Creek will be in for a disappointing future if they hold onto their stock after it is tucked into the tree-farming operations of Weyerhaeuser. With Thanksgiving fast approaching, I’ll share a more cheery forecast: I think the shareholders of Starwood Hotels will do quite well over the coming decades as part of their stock will soon be converted into a mega-hotelier with Marriott.

The specific terms of the deal: Each share of Starwood Hotels will turn into 0.92 shares of Marriott Class A stock and there will be $2 in cash received for each share. The combined company will have 1,000,000 rooms across almost six thousand hotels. This strikes me as a win-win deal for both. Marriott gets some high-quality franchises at a fair price–no small feat six years into an … Read the rest of this article!

High Net Worth Investing Client Satisfaction Trends

In 2007, families with over $500,000 in investable were asked the question “Would you give a positive recommendation of your advisor to others?” Only 31% of families answered yes. When the question became, “Are you satisfied with your advisor?”, then the affirmative yes only trickled up to 39% (the speculated reason for the eight point difference is that some families don’t want to share their advisor with others out of fear that the advisor would reveal personal details or additional clients would monopolize his time and diminish the quality of service.)

The obvious follow-up question is this: Why, before the financial crisis, did a near supermajority of clients feel uncomfortable with the type of financial representation that they were receiving? Was it unrealistic expectations? Grass is greener syndrome? Terrible advisor selection deserving of rebuke?

Nope. It’s all about a failure to meet expectations. Among people dissatisfied with their investment management, … Read the rest of this article!

The Choppiness of Blue-Chip Stock Market Returns

Because I have previously argued that Hershey is one of the best stocks to buy at today’s valuation, I want to discuss the psychological side of what owning this company for the long-term looks like. Ten years is the shortest period of time that I would regard as a qualifier for a long-term investment, so let’s put ourselves in the shoes of someone that bought Hershey stock back in 2005.

Back in 2005, shares of Hershey were available for $52.50 per share. It was earning $2.28, and someone that bought the stock would have locked in an earnings yield of 4.34% as the P/E ratio was 23. The valuation was little bit high–the kind of thing that might knock a point or two off your returns in the medium term but would eventually be burned off as confectionery brands got acquired, existing chocolate production facilities got expanded, stock got repurchased, … Read the rest of this article!